Peter Gordon and Greg Mankiw offer us some help in fixing the broken world

Greg Mankiw has somehow managed to struggle past the ordeal of some students not listening to him (which never happens to the rest of us) to pen some advice on how to fix the tax code. With some quibbles, it’s a good list, particularly the idea that you:

BROADEN THE BASE AND LOWER RATES The United States tax code is filled with deductions and exclusions that shrink the basis of taxation. The smaller base in turn requires higher tax rates to raise the revenue needed to fund government. The starting point of reform is to reverse this process.

This can work on multiple levels. So dealing with what Peter Gordon recently described to me as the frou-frou of the tax code would probably make it much fairer, or at least more tractable. But it also works for sales taxes. No, I am not saying tax food; I am saying that way too many states, like California, exempt services they shouldn’t. My favorite recent example came from Kevin Holliday: $300 Botox injections are exempt from California sales tax, but baby wipes aren’t. Given how much of higher income consumption centers on services, that exemption is counterproductive for both fairness and revenue.

Peter Gordon’s contribution has been to set forth his platform when he runs for president. I would vote for him, largely because I want his office (1) , but also because his list of plainspoken reforms is pretty good. I disagree with him on a couple of points, but particularly this one:

Envy is one of the seven deadly sins and leaders should never incite it.

Feh. I know we are supposed to buy into the idea that current concerns about inequality reflect mere envy, but we shouldn’t. History tells us that there are real problems with inequality (as well as envy). But the whining of the wealthy in this country that they just can’t chip in more taxes lest they not be able to have more $15K handbags and island getaways in Fiji (2) smacks of another one of the seven deadlies: greed.(3)

In the end, all this is horse poop. The lines between ambition, greed, and envy strike me as so fuzzy as to be irrelevant most of the time. Envy is desire (4); greed is desire, ambition is desire. So pretending these things are bad for us has a function–as moderation of our desires is good–but we all know we need these drives to get out of bed in the morning. And if this isn’t true, why aren’t all those supervirtuous gazillionaires competing to live in the smallest lots in the mobile home park while they focus on the things that truly matter, like the true love of family and contentment with what we have? (Easy, stomach).

(1) This is a case of envy.

(2) I know, I know those islands in Fiji are all job creation, for reals! Unlike those dented cans of soup purchased with Food Stamps, which create No Jobs Ever.

(3) Look, I was raised a fairly observant Catholic, and I still practice, so there’s no way you are going to out-debate me on topics contained in the category Things to Feel Guilt Over. Did you know envy wasn’t part of the original grouping of mortal sins? I believe Pope Gregory stuck it in there. I myself have all of Thomas Aquinas’ riffs on gluttony, thank you. Don’t even get me started on my trail-blazing in acedia.

(4) Sure, as Dante notes, envy isn’t just want: it’s the desire that others shouldn’t have things you don’t have. Ok. But where does ambition come from if you don’t see other people with what you want? And I’m a bit tired of this envy idea being used in the same sense of wondering why the superrich shouldn’t be expected to pay taxes to start dealing with a deficit incurred for spending on lots of things that, if the numbers are any indicator, benefitted them greatly.

Dantes inferno artwork

In which we cover mansplainers with pig poop

Here’s a topic. Sexism, Dizquz.

1. People got all up in arms when best-selling writer Jennifer Weiner pointed out, again, that the NYTs spends a disproportionate amount of time/page space slobbering over male authors. Apparently, this is again a surprise, like it was when she brought it up last year, probably among the small slice of the world population who somehow managed to avoid having Jonathan Franzen’s overhyped yucky novel shoved at them every time they left their homes. Weiner’s statements were much-criticized by the world, which likes to reassure men that they merit all the attention they get, and more.

Nobody, of course, has the sense to realize that Weiner actually deserves respect for standing up for principles here. Because her saying something will only cost her readers as some people inevitably will take out the “feminazi” label; she would have served her own financial interests better had she just not rocked the boat.

2. There were some somewhat-valid critiques, like the fact she used only the NYT when assembling the data. However, the NYT has a lot of influence (too damned much), and then this critique got thinner as people noticed that NPR was even worse than the NYT about disproportionately slobbering all over male authors. (That’s really bad. Forget my checks until you fix that, NPR. You suck.)

3. But then Salon had to get into the fray with this incoherent piece of dreck from a novelist whose work I actually read and have enjoyed: Teddy Wayne. His book Kapitoil is very, very good*, and I highly recommend it. This thing he let out at Salon, however, is so badly argued he sounds like he’s deranged; DOES HE NOT HAVE AN AGENT? Does Salon not have editors? WTF? Certainly somebody who liked this guy and was remotely interested in his career could have and should have said “Look, if you are going get into the business of apologizing for sexism, you should probably not sound like you do not have two brain cells to rub together when trying to point out that while institutions like the NYT reward men disproportionately, the reading and book-buying market actually rewards people like Weiner disproportionately.” However, I’m not sure I haven’t been too charitable in my summary because Wayne’s essay would get a B-/C+ in my class and the words “What’s the argument?” written in red pen on it.

John Scalzi, one of my favorite sci-fi authors, has a rejoinder, so I won’t bother writing one. Go read it, and cherish, like me, this bit of snark:

As best as I can tell it’s saying “Jennifer Weiner thinks she’s got it rough, but her problems aren’t really problems and it’s really men writers who have it rough because women actually read, but then again men writers get perks because they’re men, so, in sum, I’m doing fine even though I don’t sell a lot a books and also Jennifer Weiner should just shut up her best selling woman pie hole.”

I admit I’m condensing and paraphrasing. But that’s what I got out of it. In a sense it’s a tour de force, since it first asserts inequity against men, then acknowledges male privilege, and ends with mansplaining to a woman how she should feel. It’s like a triple axel directly into a pile of pig manure. It’s impressive in its way, but you have to question the wisdom of skating on shit to begin with.

*Way better than Franzen’s yucky book.

Rajiv Sethi on the double taxation debate

Again, Richard Green’s comment that academic blogs can be as much about service as they can be about self-promotion…

Rajiv Sethi brilliantly lays out the issues at play in the double taxation debate on capital gains. And while the comment zone on the inter webs is usually the Land of Untrammeled Stupidity, there is lots of smart and clarifying questions and commentary.

Drop what you are doing and go read.

Also, note his remark about my recent topic of interest:

None of this should be in the least bit surprising. Note, however, that if the corporate tax were to be eliminated today, there would be a sharp rise in the price of equities and current asset holders would enjoy a windfall gain. Similar issues arise with respect to the mortgage interest deduction: eliminating this would result in an immediate decline in home values, severely punishing those who purchased recently at prices that reflected the anticipated tax savings over the duration of the mortgage.

Ed Glaeser and why you shouldn’t worry if people do have preference for space

Why am I asking these questions other than my basic cussedness? By and large, my New Urbanism-y planners hate the deduction, and I get lectured about it all the time, and much of what they say doesn’t make sense to me. That said, I do not support continuing the deduction forever; consequentialist arguments for it, just like the consequentialist arguments against it, don’t make a huge amount of sense to me, either. However, there are some consequentialist arguments that my young planners miss, and we probably shouldn’t.

First, I’m concerned about fiddling with the mortgage interest deduction right now when such a large number of homeowners are in trouble already, even if I’m not crazy about it as policy. And given existing homeowners’ fragility, I really really don’t want to be fiddling with it now if it’s not an effective lever in land use policy. I want answers to the incidence questions I posed yesterday. It’s quite clear the benefit is more valuable to you the more interest you pay, but I don’t think that is the end of the story.

Second, dear planners, if you don’t question, you may miss a good opportunity for advocacy.

Glaeser doesn’t make this mistake. (I think he makes some others, which I’ll blog about next week). His major point here is that you can satisfy the preference for more space by building up instead of out, and that the problem of affordability in Manhattan has been due to height restrictions and overly aggressive preservation efforts than running out of land on Manhattan. His logic is good, as is his analogue: Chicago, where height restrictions have been less prevalent.

Jon Levine at the University of Michigan has argued extensively that zoning and restrictions of this ilk restrict housing choice: that there is a market for people who, under existing conditions, get forced into single-family homes who would normally go row house or big condo if there were diversity supplied in the housing market. A skylarking theory, for which I have no proof: Building multifamily is so politically unpopular that when you do get to do a project, cities I think often pursue as many units as they can because housing affordability is such an issue. There are probably economies of scale in conflict negotiation over multifamily structures. That means you aren’t necessarily developing a lot of luxury high rises anywhere except in the most expensive areas, and your troubles with neighbors there mean that your luxury high rises are *really* luxury—a small segment of your potential market.

The only way to test this issue is by easing zoning regulations and see what develops in the US. You can try comparative studies but I think it’s hard to generalize to the US at this point.

Again, I don’t see the mortgage interest deduction as a barrier to this type of development–the opposite, in fact, because even with building diversity and building up, there’s only so much land available in cities. Urban land is more expensive than land the on the fringe, for a variety of reasons, and that relationship is stable, always conveying a relative advantage for fringe development for those whose tastes go for more space. That price difference exists regardless of the deduction. By cheapening credit, you increase the possibility that, with less restrictive zoning, people can use the cheaper credit to substitute amenities for space if that is their preference.

Thus the issue is less the fact that space is a normal good that the deduction amplifies–that is probably true, but it is probably heightened by the relative lack of supply for other things in the market that one might select, given greater purchasing power. If, as my young planners and Richard Florida hope, urban condo development is the way of the future in housing in the US, making all housing more expensive by eliminating the deduction (a statement we can only make if we believe certain things about incidence) strikes me as a bit counterproductive, even if you do think rentals will be more important in future housing markets.

In which I am confused by conclusions about the mortgage interest deduction

My students currently are reading Triumph of the City by Ed Glaeser. In it, he echoes thoughts that many, many people seem to have: that the home mortgage interest deduction encourages sprawl and McMansions.

Now, I’m not a big fan of fiddling with the tax code, and I’m really not a fan of handing out tax breaks to people who have means, but I am confused by the way people have started discussing this particular policy–the consequentialist arguments in particular. For me, my first two reasons are enough to make the policy prima facie not a great idea. But the consequentialist arguments strike me as shakier than their very smart proponents, like Professor Glaeser, like to believe.

First off, it seems to me that unlike with any other tax policy, people (including economists, who should know better) assume that the incidence of the mortgage interest deduction falls entirely on the first group of beneficiaries–the home buyer. Really? With taxes, we know that they can be shifted: the example everybody loves to use is a tax on yachts. Yes, you’d like to soak the yacht-buyers by taxing yachts. But if the rich people look at the tax and suddenly decide to start buying handbags or trips to Wimbledon or botox injections or fur coats instead of yachts, the people bearing the cost of the tax are not wealthy people, but people who build yachts, including some low-wage labor. That’s shifting.

Maybe there is an empirical literature out there that Glaeser knows and I don’t–I hope Richard Green will pipe up and direct me to it–that estimates the incidence of the home mortgage interest deduction. Now, these incidence studies are difficult and subjective, but economists do them. And if these studies are out there for the mortgage interest deduction, I would like to see them. Because theoretically, I could see the incidence of the benefit moving far past the borrower to landowners (capitalizing the benefit in the price of land), mortgage lenders, and both labor and capital in the construction industry, not to mention those in the fancy-housewares and gardening industry (you get a break on your home costs, you use that buy fancy housewares). Then there’s the lifetime incidence questions that always change the calculation of incidence by a lot. Is it bad that we help young people buy homes when homes are seniors’ primary assets?

Second, it seems to me that while, yes, the mortgage interest deduction would cause you to overconsume credit, it’s not clear that, in the absences of consumer preference towards space, that cheaper credit would a priori cause you to overconsume space. So with the deduction, your mortgage credit is cheaper. Fine. But the mortgage interest deduction on $500,000 worth of mortgage is $500,000 of mortgage whether you spend that $500K on a lot of land/McMansiony house in the burbs or you use that to buy a fabulous loft in downtown. There’s nothing about the credit side of the equation that necessarily pushes you to that McMansion; it may be a supply issue (far too few high end lofts and far too many suburban homes), or, as I note, it may be a simple preference. In the the absence of that preference for space being strong and the political economy restrictions on multifamily development, wouldn’t subsidized credit just as likely yield more condos with jacuzzis and souped-up kitchens and bathrooms as it would McMansions?

Now, before you get all up my grill about being pro-sprawl and the other labels people like to throw around, I’m willing to concede that making this particular preference cheaper to indulge via the deduction is collectively bad for us. And I’m willing to believe that, given this preference, overconsumption of credit for housing leads to the marginal increase of home sizes across the board (from condos to McMansions) and that cumulatively sizes up housing in ways that are collectively not good. But…still. It doesn’t resolve the preference issue, which is relevant because a consumer preference can also be a democratic preference, which means we may have liked consuming space and thus made it easier for ourselves to do so via political economy. Which means we are looking at perhaps symptom rather than cause, albeit a symptom that becomes self-reinforcing and potentially causal over time?

But that incidence question throws in a wildcard for the above logic.

Perhaps without the deduction, wealth gains explain space consumption and we’d still have the spatial patterns we see here, only with different ownership structures. We see urban decentralization in places without the mortgage interest dedication, although not to the same degree. Sububanization has occurred worldwide even without the deduction. And we have different urban forms in the US, even though the policy is federal and it applies to all borrowers, from Portland to Atlanta. Why aren’t those places more similar in terms of housing delivery if the mortgage interest dedication is all that powerful a factor.

So leaving aside the desire to rip my throat out for daring to ask these questions, what’s the right way for me to reason my way through to the causal link between mortgage interest deducation and sprawl? Help me.

Stephanie Frank on Making Hollywood

Stephanie Frank, one of our brilliant doctoral students here at USC, has a terrific manuscript in The Journal of Urban History:

Claiming Hollywood: Boosters, the Film Industry, and Metropolitan Los Angeles

From the abstract:

In 1937, the Culver City Chamber of Commerce proposed that the city change its name to Hollywood to capitalize on its status as the leading center of film production. Once the Hollywood Chamber of Commerce learned of its counterpart’s intentions, a war of words ensued between the boosters in the local and national press. The dispute ended when the City of Los Angeles passed an ordinance establishing official boundaries for Hollywood; to this day, Hollywood is the only district within the city with such a designation. Filling a void in the literature about the industrial, place-based aspects of the film industry, this story illuminates the role of film studios in the intrametropolitan conflict in and urban development of Los Angeles, the significance of boosters in shaping places, and the complications of the decentralization of the film production economy from a cultural economy centered in Hollywood.

The Atlantic Cities did a nice writeup of the research, which can be seen here.

Way to go, Stephanie!

Immigrant employment as an externality

I’m often never quite sure with Cato reports whether the writers are attempting to hoist liberals on their own theoretical petards, or whether the writers are serious. Here’s an example:

Economist Gordon Hanson has a piece in this issue of The Cato Journal. His argument comes down to the idea that immigrant employment is an externality that employers could be made to internalize.

Now, there’s a point where Pigou-based arguments run into moral hazard, and I would think that Cato folks in particular would be sensitive to using labor-wage labor as an exemplar of an externalities. Libertarians tend to be fond of dismissing externality arguments–and for good reason–because externality arguments are a simple and convincing argument for market failure, which provides a rationale to those who would have government intervene. Playing the externality card should not be allowed with mere annoyances, given the potential hazards of government intervention. It’s hard for me to wrap myself around a libertarian argument where low-wage labor market outcomes have external costs in any real way, or if they do, counterbalance much more compelling libertarian principles such as self-ownership.

I need to re-read the paper, and re-read the whole issue, to get a better sense of what is going on. In the end, Hanson is looking for a sweet spot in policy where immigration can occur and native populations can feel compensated for it, so it’s not a mean-spirited portrayal or policy prescription at all.

Adam Ozimek over at Modeled Behavior takes up the paper at length:

Immigrants as negative externalities « Modeled Behavior:

Gordon Hanson is just trying to find ways to make immigration more acceptable to Americans so that there can be more of it, so I don’t begrudge him for proposing an unpalatable solution. After all, most pragmatic solutions to convincing Americans to tolerate more immigration seem to have some unpalatable aspect to them. But I think accepting that the fiscal burden of low-skilled immigration represents a real externality generated by employers is both untrue and an unproductive framing of the problem.


Emily Rapp on female friendship

Being in the academy, I get the whole “women are lousy mentors” line–constantly. Old women, you know, are so catty about younger, prettier women. It’s just true. Unlike the bros. They’re so cool with each other, bros are. Unlike women, who just don’t do things the right way because of their weakness and need to compete for men. (Gag).

From Emily Rapp’s fine essay, Transformation and Transcendence: The Power of Female Friendship

Recently I overheard a man say at a yoga class, “Yeah, well, you get two women together and it’s like bitch central.” I could have told him he only needed one, in fact, and that would be me, but it also made me realize how much people diminish and poo-poo the real power and strength of female friendship, especially between women, which is either supposed to descend into some kind of male lesbian love scene porn fantasy or be dismissed as meaningless or be re-written as a story of competition. Here’s the truth: friendships between women are often the deepest and most profound love stories, but they are often discussed as if they are ancillary, “bonus” relationships to the truly important ones. Women’s friendships outlast jobs, parents, husbands, boyfriends, lovers, and sometimes children.

I’ve been extremely fortunate to have both male and female mentors, and all have been wonderful. But it’s very, very hard to be supportive of other people when you are constantly told you are nothing, and where your supportiveness is both expected (because of your gender) and unappreciated (because of your gender).

The essay also contains a wonderful riff on being an older, single woman:

The Wrinklies weren’t spinsters or old maids and they were not “failures” in any way. They were free. It was I who failed to see them, until later, for who they really were: educated, hugely intelligent, fascinating, financially independent. Women who led rich lives full of meaningful work, deep and lasting friendship, sex when they wanted it, time with the beloved children of their family and friends, conversations about politics and art and literature, culture, travel to remarkable destinations where they did not journey as unconscious tourists but as guests in people’s homes and hearts. Despite these full lives they owned their own time, they owned their days. I did not. I was too busy trying to find someone who would spend the days with me, as if this would validate my presence in the world.

Go read.

H/T to Dorothea Herreiner

More about the public life of an academic blogger from Natalia Cecire

Natalia Cecire discusses the pros and cons of thinking in public on a blog, and rather hits the nail on the head with why I’ve come close–and am still thinking about–shutting down this blog.

Thinking in public is a difficult habit to get into, though, because public is the place where we’re supposed to not screw up, and thinking on the fly inevitably involves screwing up. Blogging with any regularity in essence means committing oneself to making one’s intellectual fallibility visible to the world and to the unforgiving memory of the Google cache. This is particularly a problem for academics, who are, after all, professional thinkers; we have a culture of making it look easy, and of concealing as much as possible “the raw material of poetry in all its rawness.”

My own problems have been that it’s too easy to make an argument on the Interwebs and have nobody challenge you, which means you can fall in love with your own argument even when it’s wrong–and worse, you can fall in love with your own idea of yourself as authority. The second problem is enough of a temptation in the academy. I prefer to exist in a space where 1) yes, my years of working and studying and thinking in a field do mean that my informed commentary isn’t worthless the way some people seem to think if they see a PhD by your name *and* 2) I’m still not right all the time.

Alternatively, people do challenge you, with differing level of adroitness (but that’s ok), but not all that often. It’s pretty quiet over here in this part of the Interwebs.

Nonetheless, I think she has a point when she writes:

In blogging, I’ve come around to the idea that academics need to do a lot more thinking in public if we want said public to have a clue as to what it is that we actually do. It really only seems fair.

When I discussed shutting down the blog, Richard Green referred to the blog as a “service, especially for students.” At first I was dubious, but I’ve come around to thinking of it as a service and not just a vehicle for self-promotion or a place to forge new writing.

It’s a struggle, though. I’ve always needed privacy to really write and really work. There’s part of me that thinks that private universe of thinking and struggling with ideas is happening parallel to the blog. There’s another part of me that thinks the blog saps energy from that.

Blogs and academic research: from Digitopoly

Josh Gans writes up how Paul Krugman is not right when he suggests that online publishing is somehow a substitute for academic journals in

Blogs and academic research: A timely story in Digitopoly:

So it took some time, and if you have read to the end of this lengthy post, even longer, but an initial blog post did lead to a deeper understanding of at least this phenomenon. What this demonstrates, however, is that blogging and the usual academic functions are not substitutes but complements.


Take a longer look at what he describes, as those of you interested in carbon offsets and trading will find it interesting.